Banking News

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With the current economic environment asking savers far more questions than it gives answers, it is good to know that there are alternatives available. We take a look at one such alternative that is proving particularly popular as savers face the harsh reality that the more traditional fixed rate savings products are failing to meet their needs. more

Millions of savers are facing the harsh realisty that there is little hope of change to interest and savings rates in the coming years. However, those with Cash ISAs do have one further option to consider – the ISA transfer. We take a closer look at why this is becoming a rising trend as well as what this could mean for those looking for the potential to improve the returns from their capital. more

With so many savers joining income investors in the hunt for high yields, being able to quickly understand and compare the numerous options available has become even more important. We therefore compare two of our most popular income investments to help understand what is driving their popularity and why they might meet your income needs. more

Germany's 100% savings account guarantee increases pressure on Brown

06 October 2008 / by Daniela Gieseler

In a surprise move, German Chancellor Angela Merkel announced yesterday that her government would guarantee 100 per cent of private depositors' money, raising the pressure on Gordon Brown to offer a similar guarantee to UK savers.

Only hours before her announcement, Mrs Merkel had criticised a comparable move by the Irish government last week, and agreed to work towards a greater cross-border co-ordination of rescue measures.

However, back home she was prompted to take unilateral action to prevent a panic run on banks as the proposed rescue deal for Hypo Real Estate (HRE), one of the biggest German commercial mortgage and public sector lenders, was on the verge of collapsing.

The deal was threatened when a consortium of German banks pulled out after the stricken bank revealed that the amount needed for its rescue was far higher than expected, and a new rescue plan had to be established. A collapse of HRE, which has business operations all over Europe, would have had repercussions for the whole continent.

"We won't allow the crisis in a single institution to become a crisis for the whole system," pledged Mrs Merkel, "we owe it to the taxpayers." With the introduction of the new guarantee, the former legal limit which guaranteed 90 per cent of all bank deposits up to €20,000 per account will be abolished.

The German pledge has heightened the pressure on the British Government to offer a similarly extensive guarantee, instead of just increasing the limit up to which savings accounts and deposits are protected from £35,000 to £50,000 per bank.

Gordon Brown had so far resisted such a dramatic step fearing the exposure it would give taxpayers. However, politicians like Liberal Democrat leader Nick Clegg said: "Ireland's action last week to guarantee all deposits made a common European approach to deposit guarantees necessary. Germany's decision today makes it completely unavoidable."

"Germany is Europe's economic superpower. Where it leads, others are bound to follow," Mr Clegg added. However, new Business Secretary Peter Mandelson warned that "the danger of this crisis is that it may spark a new wave of economic nationalism."

The Bank of England and the Treasury are considering a range of other measures to support the banking system, including the injection of further money into the system to ease the pressure on British banks and to purchase 'toxic' mortgage-related assets.